Situational awareness: You might have noticed that the stock market was volatile this week, and also fell quite a lot, while bond yields rose. That would normally reduce the odds of a Fed hike, since the market is basically doing the Fed's job for it.
- The confounder is Donald Trump. The Fed's main job is not to set monetary policy, but rather to maintain independence from the White House — and, most importantly, to be seen to be independent from the White House.
- The more Trump complains about the Fed hiking, the more the Fed is forced to hike. Failure to do so would look like capitulation to the president, which is the worst thing that any Fed chair can do.
- We'll find out more about what Jay Powell's Fed is thinking when the minutes of the September Fed meeting are released on Wednesday.
- Also driving the markets this week: BlackRock, Morgan Stanley and Goldman Sachs all report earnings on Tuesday morning, with Netflix arriving in the afternoon. Also, expect Sears to file for bankruptcy in the next few days.